Sebi Restored the Cut-Off for Equity Mutual Fund Purchases and Redemptions to 3 pm
By: Ashwathy Nair
- Sebi has reduced the cut-off time for availing the same day’s net asset value for mutual fund schemes.
- The cut-off timings may be continued until further notice by RBI on truncated market hours.
- The community was restricted to equity and hybrid schemes, leaving debt funds out of its purview.
The Securities and Exchange Board of India (SEBI) has reduced the cut-off timing for mutual funds to be restored to 3 pm from 19th October. The cut-off timing decides the Net Asset Value (NAV) calculation for mutual funds. The cut-off time for mutual fund scheme had been reduced to 1 pm from 3 pm in April because of the disturbance that has been occurred by the COVID-19 pandemic and the lockdown. The cut-off time was reduced to 12:30 pm from 1:30 pm for liquid and overnight funds.
“The cut-off timings for debt schemes and the conservative hybrid fund would be continued until the Reserve Bank of India (RBI) receives some further notice about the truncated market hours”.
The recent changes that are made to mutual fund rules that are starting from 1st January 2021, Net Value Asset on units intend to be allotted based on when will the amount be realized regardless of the size or time of the investments.
As the realization of funds on the same day is already required for purchases in such schemes, so the provisions do not apply to liquid and overnight funds.
Currently, when made before the cut-off deadline, mutual fund investors with cheque values of less than Rs 2 lakh per request receive the NAV of the commodity on the same purchase date. The NAV that is applicable for investments over Rs 2 lakh will be on the day the fund house has made the cheque. This may be up to three days after the submission of the cheque.
According to the circular, for that day’s NAV to be applicable, the cash should also reach the mutual fund house before 3 pm (cut-off time).
The move would generate a level playing field across mutual fund schemes for investors and is expected to increase the use of digital payments as well.
